Olatunji was born in the village of Ajido, near Badagry, Lagos State, in southwestern Nigeria. A member of the Yoruba people, Olatunji was introduced to traditional African music at an early age. He read in Reader's Digest magazine about the Rotary International Foundation's scholarship program, and applied for it. He went to the United States of America in 1950.

Olatunji received a Rotary scholarship in 1950 and was educated at Morehouse College in Atlanta, Georgia, where he desired to, but never sang in the Morehouse College Glee Club. Olatunji was a good friend of Glee Club director Dr. Wendell P. Whalum and collaborated with him on a staple of the choir's repertoire, "Betelehemu", a Nigerian Christmas carol. After graduating from Morehouse, he went on to New York University to study public administration. There, he started a small percussion group to earn money on the side while he continued his studies.[1]

After hearing Olatunji perform with the 66 piece Radio City Music Hall orchestra Columbia RecordsA&R man John Hammond signed Olatunji to the Columbia label in 1957. Two years later he released his first of six records on the Columbia label, called Drums of Passion. Drums of Passion became a major hit and remains in print; it introduced many Americans to world music. Drums of Passion also served as the band's name.

In 1969, Carlos Santana had a major hit with his cover version of this first album's "Jin-go-lo-ba", which Santana recorded on his debut album, Santana, as "Jingo".
Olatunji's subsequent recordings include Drums of Passion: The Invocation (1988), Drums of Passion: The Beat (1989) (which included Airto Moreira and Carlos Santana), Love Drum Talk (1997), Circle of Drums (2005; originally titled Cosmic Rhythm Vibrations, with Muruga Booker and Sikiru Adepoju), and Olatunji Live at Starwood (2003 – recorded at the 1997 Starwood Festival with guest Halim El-Dabh. He also contributed to Peace Is the World Smiling: A Peace Anthology for Families on the Music for Little People label (1993).

Olatunji was a music educator, and invented a method of teaching and recording drum patterns which he called the "Gun-Dun, Go-Do, Pa-Ta" method after the different sounds made on the drum. He taught drum and dance workshops year-round starting in the late 1950s. Over the years he presented workshops nationally and internationally at colleges, universities, civic, cultural, and governmental organizations.

He co-wrote Musical Instruments of Africa: Their Nature, Use and Place in the Life of a Deeply Musical People with Betty Warner-Dietz (John Day Company, 1965). He taught a summer drumming and African dance course with his wife, at the Omega Institute in Rhinebeck, New York for many summers during Family week. He also taught at the Esalen Institute in California beginning in 1985.

For the few years before his death Olatunji made his home at the wild Big Sur coastline. He became a scholar-in-residence at the Esalen Institute. During this time, he already suffered severely from diabetes and was assisted by Nora Arjuna, Leo Thompson and Leon Ryan until shortly before his death in Salinas, California in 2003 from diabetes, on the day before his 76th birthday.

Olatunji was part of Mickey Hart's Planet Drum projects, including the album Planet Drum, which won the Grammy Award for Best World Music Album of 1991, the first year for which the award was given.[2]

He was an inductee into the Percussive Arts Society Hall of Fame in 2001.[3]